Memorandum SAN IPSE CAPITAL OF SILICON VALLEY. FROM: Jennifer Schembri TO: HONORABLE MAYOR AND CITY COUNCIL. SUBJECT: SEE BELOW DATE: August 17, 2015

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1 COUNCIL AGENDA: 8/18/2015 ITEM: 3.4 CITY OF C ^3 SAN IPSE CAPITAL OF SILICON VALLEY Memorandum TO: HONORABLE MAYOR AND CITY COUNCIL FROM: Jennifer Schembri SUBJECT: SEE BELOW DATE: August 17, 2015 Approved SUPPLEMENTAL SUBJECT: ACTIONS RELATED TO THE SETTLEMENT AGREEMENT WITH THE SAN JOSE POLICE OFFICERS' ASSOCIATION AND THE SAN JOSE FIRE FIGHTERS, INTERNATIONAL ASSOCIATION OF FIRE FIGHTERS, LOCAL 230 REASON FOR SUPPLEMENTAL The reason for the supplemental memorandum is to provide additional information based on an addendum to the Alternative Pension Reform Settlement Framework Agreement reached with the San Jose Police Officers' Association (SJPOA) and International Association of Fire Fighters, Local 230 (IAFF, Local 230) on the quo warranto process to implement the Alternative Pension Reform Settlement Framework ("Framework Agreement"). BACKGROUND The City, the SJPOA and IAFF, Local 230 reached an agreement on the Framework Agreement on July 15, This agreement provides the framework for a settlement of the outstanding litigation between the parties regarding Measure B. This settlement is contingent on a number of factors, including settlements by other litigants (other bargaining units and retirees). Because the Framework Agreement does not include specific terms for implementation, the parties continued discussing the appropriate implementation path to take while acknowledging that the City is still in global settlement discussions with the Federated bargaining units and retirees' association. Addendum #1 regarding the ballot measure (Attachment A) and Addendum #2 regarding the implementation plan (Attachment B) should be considered addendums to the Alternative Pension Reform Framework Agreement. ANALYSIS The agreed upon implementation path utilizes a two-prong approach that includes using the SJPOA quo warranto case to immediately implement the agreed-upon changes to retirement benefits and pursuing a November 2016 ballot measure. It is important to note that the quo warranto process allows the parties to carry out the Alternative Settlement Framework as quickly as practical to begin recruiting and retaining police offers immediately. Under the agreement, before the quo warranto process is initiated in Court, the POA and IAFF, Local 230 will work collaboratively with the City to develop a Charter amendment ballot measure,

2 HONORABLE MAYOR AND CITY COUNCIL August 17,2015 Subject: Actions Related to the Settlement Agreement with the San Jose Police Officers' Association and the San Jose Fire Fighters, International Association of Fire Fighters, Local 230 Page 2 which, if the quo warranto process (as defined in the Settlement Framework and Proposed Quo Warranto Implementation Plan) succeeds, will supersede Measure B with the following: (1) a provision requiring voter approval of defined benefit pension enhancements, (2) a provision requiring actuarial soundness, (3) a provision prohibiting retroactivity of defined benefit pension enhancements, and (4) any other provisions contained in the Settlement Framework to which the parties mutually agree. The ballot measure will go to voters in November Once the parties mutually agree on language, POA and IAFF agree to endorse the ballot measure. Please refer to Attachment A - Addendum #1 for the agreement. Once the Federated bargaining units and retirees' association agree to and ratify a global settlement of the remaining Measure B litigation, the implementation process will begin. Each party will request a stay in the Appellate Court regarding the Measure B litigation and unfair practice charges before the California Public Employee Relations Board (which will be stayed until December 31, 2015 subject to quarterly continuation if the quo warranto process is on-going). Using the POA case, the parties will propose a stipulation to stay the implementation of Measure B while the other items in the implementation process are proceeding. Please note that this may require coordination with the Attorney General. The parties will then propose a Stipulated Judgment in the quo warranto case that Measure B should be invalidated; however, the settlement will be non-precedential in any forum and the City will not admit wrongdoing (and the judgment will not include a finding that it negotiated in bad faith). The issue will be whether or not the City should have placed on the ballot the version of the ballot measure adopted by Council in December 2011 or resumed negotiations once it was modified. Please see the Attachment B - Addendum #2 for the detailed Proposed Quo Warranto Implementation Plan. As part of the addendum agreement, the SJPOA and IAFF, Local 230 will oppose any third party litigation that challenges the invalidation of Measure B, whether by joining the litigation or petitioning an Amicus Brief. In the event that the Federated bargaining units and retirees' association do not reach agreements to settle litigation with the City or the quo warranto process fails to invalidate Measure B, the parties agreed that the November 2016 ballot measure would implement the Alternative Pension Reform Framework. The City Administration will continue to update the Council on the implementation process. Jennifer Schembri Director of Employee Relations Attachment A - Addendum #1 to the July 15, 2015 Alternative Pension Reform Settlement Framework Attachment B - Addendum #2 to the July 15, 2015 Alternative Pension Reform Settlement Framework For questions, please contact Jennifer Schembri, Director of Employee Relations at (408)

3 Attachment A ADDENDUM #1 TO THE JULY 15, 2015 ALTERNATIVE PENSION REFORM SETTLEMENT FRAMEWORK BETWEEN. THE CITY OF SAN JOSE AND THE SAN JOSE POLICE OFFICERS' ASSOCIATON (POA) THE INTERNATIONAL ASSOCIATION OF FIREFIGHTERS, LOCAL 230 (IAFF) The POA and IAFF, Local 230 agree to work collaboratively with the City to develop a ballot measure, which, if the quo warranto process (as defined in the Settlement Framework and Proposed Quo Warranto Implementation Plan) succeeds, will supersede Measure B with the following (1) a provision requiring voter approval of defined benefit pension enhancements, (2) a provision requiring actuarial soundness, (3) a provision prohibiting retroactivity of defined benefit pension enhancements, and (4) any other provisions contained in the Settlement Framework that the parties mutually agree to, for inclusion in a 2016 ballot measure that will incorporate any such provisions into the City Charter. Once the parties mutually agree to the language, POA and IAFF shall endorse the ballot measure. ' FOR THE UNIONS: Charles Sakai Labor Consultant / Joel Phelan President, IAFF, Local 230 Sean Kaldor Vice President, IAFF, Local 230 Christopher Platten Legal Counsel, IAFF, Local 230 Torrf Saggau SJPOA/IAFF, Local 230 Consultant

4 Attachment B ADDENDUM #2 TO JULY 15, 2015 ALTERNATIVE PENSION REFORM SETTLEMENT FRAMEWORK BETWEEN THE CITY OF SAN JOSE AND THE SAN JOSE POLICE OFFICERS' ASSOCIATON (POA) " THE INTERNATIONAL ASSOCIATION OF FIREFIGHTERS, LOCAL 230 (IAFF), 1,; " ^ * A ^ a MBMBjj -A" if""'- PROPOSED QUO WARRANTO IMPLEMENTATION PLAN, AUGUST 14, 2015 As agreed upon by the City, the San Jose Police Officers' Association and the International Association of Firefighters, Local 230, the proposed quo warranto implementation plan shall be followed by the parties in the manner prescribed below. Step Time - r - V>*V* J A- > Action ^ T - ^ ' <. ''V, Upon ratification of Federated/Retirees Deal fi >, ;:.Tt TP??:? Global Settlement Addendum Agreement on quo warranto process: Global settlement involving all litigants (including retirees) and bargaining unit representatives Entered into for purposes of settlement Except as otherwise provided in the stipulated order and Judgment described below no admission of wrongdoing, including no admission that the City acted in bad faith Non-precedential for any purpose Immediately after #1 : Parties ask fqr a stay in appellate proceedings (Lucas ruling). Local 230 will. also ask for a stay in the PERB proceedings until December 31, If Step 8 has occurred and the quo warranto process is still ongoing, the stay will be continued on a quarterly basis until the conclusion of the quo warranto process. Immediately after #1 Begin drafting ordinances and Tripartite Retirement MOA. Begin identifying ordinances implemented as a result of Measure B. Immediately after #1 : Local 230 intervenes as necessary/indispensable party in POA quo warranto case, without objection from the City, which may require seeking permission from the Attorney General. Immediately after #1 Use POA case to offer a proposed stipulation to the Judge staying the implementation of Measure B pending further proceedings outlined below, which may require coordination with the Attorney General. Immediately after #1 f?artie^ pursuant to Addendum #1, simultaneous Simultaneous with #6 with agreement on stipulated facts, order and judgment. Proposed Stipulated Facts, Order and Proposed Stipulated Judgment in quo warranto case."vi > VA / C, ^ > V, Outline of stipulated facts and findings:. history of negotiations including agreement on impasse as of 10/31, number of negotiation sessions, and use of mediation; changes to the proposed ballot language, including post-impasse changes; tension between City's powers and MMBA and effort to harmonize through Seal Beach negotiations as described on pages 3-4 of Attorney General opinion No

5 is0$ r S/ ' - X" ^ - -\-- : y ~ L ^ - % " ^., Upon completion of #6 and #7 ' 9* - Upon entry of judgment in %w r v quo warranto case v. " 14; : language from AG decision to grant QW based on the question of whether impasse had been broken by post-impasse ballot changes made by City and whether City Council needed to negotiate further (the inherent powers vs. MMBA issue); the cost and time and risks of litigating QW, including appeals and the issue of whether a decision in QW case would be universally applicable; the desirability of finding a solution that is collaborative financial challenges facing City and retirement funds - desire on part of employees, retirees and City to make benefits sustainable; Stipulated Order that City should have engaged in further negotiation of final language before putting on ballot to comply with MMBA obligations and failure to do so was a procedural defect significant enough to declare null and void Resolution placing Measure B on ballot; This order will not include a finding that the City acted in bad faith. Any additional language required by the court to allow the Court to approve the parties' Stipulated Order and Judgment. The Court order must be factually accurate. Agreement that Resolution No shall be null and void. Overriding public interest in expedited resolution of quo warranto proceedings and implementation of Settlement Framework to restore and improve city services and sustainability of retirement plans. Stipulated Judgment shall reflect that Measure B shall be invalidated Submission of Stipulated Order, and Stipulated Judgment to quo warranto judge, which may require coordination with the Attorney General. Formally adopt ordinances to implement Settlement Framework and replace Measure B. All parties dismiss/withdraw all complaints, unfair practice charges, etc. January,2Q16 ;?;: Begin discussions over, including any other provisions in Settlement ; : ; FTamewprk in ballot measure (per Addendum #1 to Settlement Framewprk) to be completed by July 2016 immediately upon: (t) : federated unions failing to IF" ir> 1 : reach pension settlement;. -^fz- (2) retirees not settling their litigation; or (3) quo. Warranto process not succeeding,in invalidating r r Measure B' - : : POA and Local 230 agree to oppose any third party litigation challenging the invalidation of Measure B through the quo warranto process either by joining the litigation or by petitioning to file an Amicus Brief. Craft ballot measure to implement all aspects of Settlement Framework. ' " : V.:' : C-v..!V-7 Page 2 of3

6 FOR THE UNION: City Manager ST^iMUfAfcrvL ^ Jei writer Schembri Director of Employee Relations ' Dane ypaul KeUjjf / Presideqt^JPOA Edgardo Garcia Assistant Chief of Police srggg Adam sjpoa Counsel Charles Sakai Labor Consultant Joel rhelan President, IAFF, Local 230 Srln 1 SearpKalcfor / VicePresident, IAFF, Local230 Christopher Platten Legal Counsel, IAFF, Local 230 /i^ Tom Saggau SJPOA/IAFF, Local 230 Consultant Page 3 of 3